Local answers for a global pandemic
The world’s facing a global pandemic but answers are logically local: the situation varies not only from country to country, but also from region to region, from city to city. Measure to safe-keep public health and safeguard the economy are also taken at national levels. But as our industry is global in scale, with — under normal circumstances — constant travel and communication at the top tier (especially in the social network era), there’s interest for what’s being done next door or at the other end of the world. In this two part series, we have decided first to take a look at measures that have been taken to alleviate pressure on bars and second at what’s happening in places who are on their way to reopening.
For this first article we have talked with bar owners or managers across 9 major cocktail hubs: China, Hong Kong, Singapore, France, Norway, Spain, United Kingdom, Canada and Mexico. We have asked them what help — if any — they had received and what was their outlook. Here’s what we’ve learned.
This is obviously the big worry for many: payroll is one of a bar’s most important fixed costs, impossible to sustain when closed. Thankfully most bars polled have received help, with various schemes, including staff furlough or direct cash transfers to employers to cover payroll. In Norway, for example, the State covers 100% of the wages for the first 20 days, 62,6% afterwards. In the UK, it’s 80%. In France, 70%. Sometimes, though, there are strings attached: the Spanish scheme includes a prohibition to terminate contracts for furloughed employees once the state of emergency is winded down. This will be a problem if business doesn’t pick up immediately. And then, there’s the outlier: Mexico’s bars have received no help with wages. They haven’t received any help with anything, actually.
This is the other big one and a black mark for many bars in many countries. Norway, once again, leads the way, with the State picking up most of a bar’s fixed costs. Singapore has offered rebates to landlords who are mandated to hand them down to tenants. Those are the exceptions: in most affected countries, tenants have to negotiate with landlords, who are under no obligation to lend a helping hand. And so in the same city, we’ve heard of a bar with a 2700 euros rent brought down to just 500 for the duration of the crisis while another, with a 6000 euros rent, was told not to expect any leniency. Tenant-landlord negotiations may well be decisive in deciding the fate of many bars.
Taxes / Social security charges / VAT / …
In a crisis that affected first the whole health system and then the economy, all States are trying to manage their finances in order to being able to respond as and when needed. This means that most countries are not in any hurry to reduce or drop taxes to relieve businesses. Most do, however, offer to postpone payment until better days. But payment will have to be made at some point — which will be a problem for many, especially bars who have agreed to pay their landlords in arrears. Will business pick up fast enough for this to make sense? Germany has recently announced a reduced VAT for hospitality. Will other countries follow?
In many countries, bars find it hard getting bank credits to open. This may have been a blessing in disguise in this crisis: Benjamin Padron from Mexico’s Limantour underlines how they’ve been used to working with their own savings, debt-free. In other countries, varying policies have been put in place. In France, you can suspend payments on your credit and the life of the credit will be extended by the number of months you’ve missed payments on, no extra interest charged. Other countries offer interest-free periods.
Reducing overhead is not always enough, though, and many businesses need help — especially when cash is low. Spain and France, for example, offer low interest loans through a public banking institution or underwrite emergency loans. Adding debt to deferred taxes or rent in arrears is not the perfect solution, though. Bars in many countries would rather see a scheme such as the emergency Grant Fund in place in the UK, where businesses could receive between 10k and 25k pounds.
All countries have faced the pandemic in their own way. Although Mexico is an obvious outlier, most of the measures taken seem similar — their extent depending on the financial capacities of the State. Most of the bars we have polled have told us they could survive enforced closure for up to six months. Some, however, do wonder if it’s worth it and if they wouldn’t be best served closing their business definitely and open new ones once the sky clears. None expect the situation to be back to normal anytime soon — with timeframe such as 12 or 18 months being quoted.
All the information used for this article was collected through interviews. They are assumed valid at the time of asking. If there’s anything wrong with any of the info, it’s the author’s sole responsibility, not the interviewees.
For entrepreuneurial stories on the industry's response and reaction to the pandemic, check out Entrepreneur Frontline, a Havana Club and Difford's Guide collaboration.